The ACIT, Circle-1, Bhavnagar V. Shri Kapoorchand K.Bansal,HUF, Bhavnagar

ITA 2912/AHD/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51027 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 12-12-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 23-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B R POPAT
• Keywords: Wrong claim; Onus to prove; Set aside
• Section: 271(1)(c); 80IB

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI D.K.TYAGI, JM AND A. K. GARODIA, AM. ITA NO.2912/AHD/2009 ASST. YEAR:2004-05 ASSTT. CIT, CIRCLE-1, BHAVNAGAR. VS. SHRI KAPOORCHAND K. BANSAL-HUF, D-9, OPP. ORIENTAL BANK OF COMMERCE, KALVIBID,BHAVNAGAR. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI VINOD TANWANI, SR.DR RESPONDENT BY:- SHRI B. R. POPAT, AR DATE OF HEARING :12/12/2011 DATE OF PRONOUNCEMENT : 21.12.11. O R D E R PER D. K. TYAGI, JUDICIAL MEMBER . THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) DATED 21.07.2009 FOR ASST. YEAR 2004-05 WHER EIN THE FOLLOWING GROUND HAS BEEN RAISED :- (1) THE LD. CIT(A)-XX, AHMEDABAD HAS ERRED IN LAW AND O N FACTS IN CANCELING THE PENALTY OF RS.2,97,250/- LEVIED U/ S 271(1)(C) OF THE IT ACT BY THE AO WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD BY THE AO. ITA NO.2912/AHD/2009 ASST. YEAR 2004-05 2 2. THE GROUND RAISED BY THE REVENUE IS REGARDING DE LETION OF PENALTY OF RS.2,97,250/- LEVIED U/S 271(1)(C) BY LD. CIT(A) . BRIEF FACTS OF THE CASE ARE THAT THE ORIGINAL ASSESSMENT WAS MADE ON 28.12. 2006 FOR THE ASST. YEAR UNDER CONSIDERATION MAKING THE ADDITION OF RS. 9,00,741/- ON ACCOUNT OF DISALLOWANCE OF CLAIM OF DEDUCTION U/S 8 0IB. AGAINST THIS ORDER, THE ASSESSEE WENT IN APPEAL BEFORE LD. CIT(A ) AND HE DISMISSED THE APPEAL OF THE ASSESSEE ON THIS GROUND. THE AO ISSUE D A SHOW CAUSE NOTICE U/S 271(1)(C) ON THE GROUND OF SUSTAINING THE DISAL LOWANCE OF CLAIM OF DEDUCTION U/S 80IB TO THE EXTENT OF RS.9,00,741/- A ND CONSIDERING THE SAME AS ASSESSEES CONCEALED INCOME. THE AO ASKED T HE ASSESSEE TO EXPLAIN THE REASONS FOR WRONG CLAIM OF DEDUCTION AN D IN RESPONSE TO WHICH THE ASSESSEE FURNISHED THE DETAILED REPLIES W HICH WERE NOT FOUND CONVINCING BY THE AO. THE AO HAD HELD THAT THE RECE IPTS SHOWN BY THE ASSESSEE BY WAY OF RECOVERIES OR OTHER INCOME WAS N OT PART OF SALES AND THEREBY DID NOT ALSO FALL WITHIN THE AMBIT OF CENTR AL EXCISE ACT OF INDIA, LAW OF SERVICE TAX OR UNDER THE SALES-TAX ACT. HOWE VER, THE ASSESSEE IN THE COMPUTATION OF INCOME HAD CLAIMED DEDUCTION U/S 80IB @ 25% OF RS.36,02,965/- INCLUSIVE OF THE OTHER INCOME OF RS. 49,75,640/-. THE AO HAD GIVEN EMPHASIS ON SECTION 80IB THAT WHERE THE G ROSS TOTAL INCOME OF AN ASSESSEE INCLUDES ANY PROFIT AND GAINS DERIVED F ROM ANY BUSINESS.THERE SHOULD, IN ACCORDANCE WITH AND SUBJ ECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, ITA NO.2912/AHD/2009 ASST. YEAR 2004-05 3 A DEDUCTION FROM SUCH PROFITS AND GAINS.THUS A PLA IN READING OF THE SECTION CLEARLY INDICATES THAT SUCH DEDUCTION WAS A PPLICABLE TO THE PROFIT AND GAINS OF THE BUSINESS AND NOT ON THE OTHER INCO ME OF THE BUSINESS. IN THIS CASE IF SUCH OTHER INCOME WAS EXCLUDED IT WOUL D THEN RESULT IN NIL INCOME AND THUS MAKING THE ASSESSEE INELIGIBLE FOR CLAIM OF DEDUCTION U/S 80IB. GIVING ABOVE FINDINGS AND RELYING ON THE DECI SIONS OF HONBLE SUPREME COURT IN THE CASES OF CIT VS. STERLING MACH INE TOOLS, 237 ITR 579 AND PANDIAN CHEMICALS 262 ITR 278 THE AO HELD T HAT THE ASSESSEE HAD MADE WILLFUL CONCEALMENT OF INCOME BY FURNISHIN G INACCURATE PARTICULARS OF ITS INCOME AND THUS, LEVIED THE PENA LTY IN QUESTION. 3. THE ASSESSEE WENT IN APPEAL BEFORE THE FIRST APP ELLATE AUTHORITY, WHEREIN DETAIL SUBMISSIONS HAD BEEN MADE WHICH HAVE BEEN NARRATED BY THE LD. CIT(A) AT PAGES 3 TO 8. FOR THE SAKE OF BRE VITY THE SAME ARE NOT REPEATED HERE. THE LD. CIT(A) AFTER CONSIDERING THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE ASSESSEE DELETED THE PENALTY BY OBSERVING AS UNDER:- 2.3 I HAVE CAREFULLY CONSIDERED THE CONTENTIONS OF THE LD. COUNSEL FOR THE APPELLANT AND THE CASE-LAWS RELIED UPON BY HIM AND HAVE ALSO CAREFULLY GONE THROUGH THE PENALTY ORDER IN QUESTIO N PASSED BY THE AO. IN THIS CASE, THE PENALTY U/S 271(1)(C) HAS BEEN LEVIE D BY THE AO ON THE GROUND THAT THE APPELLANT HAS CLAIMED WRONG DEDUCTI ON U/S 80IB AND RESULTANTLY, FURNISHED INACCURATE PARTICULARS OF HI S INCOME. FROM THE FACTS OF THE CASE, IT COMES OUT THAT SO FAR AS THE PENALTY PROCEEDINGS ARE CONCERNED, THE APPELLANT HAS THOUGH CLAIMED DEDUCTI ON U/S 80IB ON THE INCOME OF SALE OF OXYGEN GAS INCLUDING THE OTHER IN COME SHOWN SEPARATELY BUT CLAIMED THE DEDUCTION ON IT STATING THAT IT IS RELATED TO SALE ITA NO.2912/AHD/2009 ASST. YEAR 2004-05 4 OF OXYGEN GAS ACTIVITIES. THE APPELLANT HAS CLAIMED DEDUCTION WHICH HAS NOT BEEN HELD TO BE ALLOWABLE IN VIEW OF VARIOUS JU DGMENTS AS QUOTED IN THE FIRST APPELLATE ORDER AS HELD BY THE VARIOUS HI GH COURTS AND THE HONBLE SUPREME COURT. THIS FACT IS VERY CLEAR AS R EGARDS THE ALLOWABILITY OF DEDUCTION U/S 80IB IN THE CASE OF T HE APPELLANT WHICH IS NOT ALLOWABLE ON THE INCOME WHICH HAS NOT DIRECTLY BEEN DERIVED FROM THE MAIN BUSINESS ACTIVITIES OF THE APPELLANT BUT SO FA R AS THE PENALTY PROCEEDINGS ARE CONCERNED, IN THIS CASE, THE APPELL ANT HAS CLAIMED THE DEDUCTION AS PER THE SUGGESTION AND CERTIFICATE OF THE AUDITORS AND THE BOOKS OF ACCOUNT OF THE APPELLANT ARE AUDITED. IT T HUS BECOMES CLEAR THAT THE APPELLANT HAD BONA FIDE BELIEF ON THE BASIS OF ADVICE OF THE AUDITOR AND CLAIMED THE DEDUCTION ACCORDINGLY U/S 80IB OF T HE ACT. THE APPELLANT HAS OFFERED AN EXPLANATION WHICH HAS NOT BEEN ACCEP TED BY THE AO AND THE CLAIM OF DEDUCTION HAS NOT BEEN ACCEPTED BY THE AO BUT IT DOES NOT AUTOMATICALLY LEAD TO IMPOSITION OF PENALTY U/S 271 (1)(C) OF THE ACT UNLESS IT IS PROVED THAT THE CONTENTION AND CLAIM OF THE A PPELLANT WAS BASED ON FALSE CLAIM WHICH THE APPELLANT KNEW TO BE FALSE. T HE HONBLE SUPREME COURT IN THE CASE OF T. ASHOK PAI VS. CIT (2007) 29 2 ITR 11 LAID DOWN THE PROPOSITION THAT THE PENALTY PROCEEDINGS AND IN DEPENDENT PROCEEDINGS WHERE THE MATTER HAS TO BE CONSIDERED A FRESH FROM THE ANGLE REQUIRED BY THE LAW RELATING TO PENALTY AND THAT TH E BURDEN OF PROOF PLACED ON THE ASSESSEE UNDER THE EXPLANATION IS SUB JECT TO THE CONDITIONS THEREIN. IT HAS ALSO BEEN LAID DOWN THAT WHERE AN A SSESSEE ACTS ON LEGAL ADVICE THOUGH WRONG THE OMISSION SHOULD BE TREATED AS BONA FIDE WITH NO DELIBERATENESS INVOLVED. THE FACT OF THE CASE AND T HE ACTION OF THE AO HAS ALSO BEEN CONSIDERED IN LIGHT OF THE CASE OF DHARME NDRA TEXTILE PROCESSORS WHICH THE LD. COUNSEL OF THE APPELLANT C LARIFIED AND DISTINGUISHED. IN THIS CASE IF SEEN CAREFULLY, THER E IS COMPLETE AND PROPER DISCLOSURE OF THE FACTS IN THE ANNUAL ACCOUNTS AND IN THE IT RETURN. THE CLAIM OF DEDUCTION U/S 80IB IS DULY SUPPORTED BY TH E CERTIFICATION OF THE C.A. THOUGH THE ADDITION IN THIS CASE, HAS BEEN CON FIRMED IN THE FIRST APPEAL ON THE POINT OF CLAIM OF DEDUCTION U/S 80IB, THE PENALTY PROCEEDINGS BEING ALTOGETHER DISTINCT AND SEPARATE, CANNOT BE EQUATED WITH THE ASSESSMENT PROCEEDINGS. THE PENALTY IMPOSE D BY THE AO FOR FURNISHING OF INACCURATE PARTICULARS OF INCOME CANN OT BE SUSTAINED BECAUSE IN THIS CASE, IT IS ONLY THE REJECTION OF C LAIM OF DEDUCTION AND IN FACT, THERE IS NOTHING AS SUCH WHICH HAS BEEN CONCE ALED OR INACCURATE PARTICULARS OF INCOME HAVE BEEN FILED AS STATED BY THE AO. THEREFORE, KEEPING IN VIEW THE NATURE OF THE BUSINESS, CLAIM O F DEDUCTION MADE, CIRCUMSTANCES IN WHICH THE CLAIM HAS BEEN REJECTED, I HOLD THAT IN THIS CASE, NO PENALTY FOR FURNISHING OF INACCURATE PARTI CULARS OF INCOME IS WARRANTED. HENCE, THE PENALTY IMPOSED OF RS.2,97,25 0/- U/S 271(1)(C) IS HEREBY CANCELLED. ITA NO.2912/AHD/2009 ASST. YEAR 2004-05 5 AGAINST THIS ORDER OF THE LD. CIT(A), THE REVENUE I S IN APPEAL. 4. THE LD. DR RELYING ON THE PENALTY ORDER OF AO SU BMITTED THAT THE LD. CIT(A) HAS WRONGLY DELETED THE PENALTY. HE SUBM ITTED THAT THE ASSESSEE HAD CLAIMED DEDUCTION U/S 80IB AND THE AO HAD DISALLOWED THE SAME. THE LD. CIT(A) HAD SUSTAINED THE ACTION OF TH E AO. ON THE BASIS OF SUSTAINED ADDITION THE AO ISSUED SHOW-CAUSE NOTICE AND THE EXPLANATION OF ASSESSEE WAS NOT FOUND SATISFACTORY. THE ASSESSE E COULD NOT SUBSTANTIATE ITS CLAIM OF DEDUCTION U/S 80IB IN RES PECT OF OTHER INCOME AS HELD BY THE AO AND AFTER THE DECISION OF HONBLE SU PREME COURT IN THE CASE OF CIT VS. STERLING MACHINE TOOLS REPORTED IN 237 ITR 579 THE POSITION OF LAW WAS QUITE CLEAR THAT THE DEDUCTION U/S 80IB WAS NOT ADMISSIBLE IN RESPECT OF THE SAID INCOME. THE LD. C IT(A) IS NOT JUSTIFIED IN DELETING THE PENALTY WITHOUT APPRECIATING THE RATIO LAID DOWN IN THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SOHAN SINGH REPORTED IN 244 ITR 177 IN WHICH THE HONBLE COURT HAS HELD THAT THE ASSESSEE MUST OFFER AN EXPLANATION TO SHOW THAT THE RE WAS NO FRAUD, GROSS OR WILLFUL NEGLIGENCE INVOLVED IN NOT RETURNING THE CORRECT INCOME IN HIS RETURN AND IT IS NOT SUFFICIENT IF ANY FANCIFUL OR TOTALLY UNTENABLE EXPLANATION IS OFFERED. THE LD. CIT(A) HAS ALSO NOT APPRECIATED THE PROPOSITION OF LAW IN THE DECISION OF HONBLE SUPRE ME COURT IN THE CASE OF UNION OF INDIA & OTHERS VS. DHARMENDRA TEXTILE P ROCESSORS & OTHERS ITA NO.2912/AHD/2009 ASST. YEAR 2004-05 6 REPORTED IN 306 ITR 277 WHEREIN IT HAS BEEN HELD TH AT WILLFUL CONCEALMENT IS NOT AN ESSENTIAL INGREDIENT FOR LEVY OF PENALTY U/S 271(1)(C). THUS THE AO HAD LEVIED THE PENALTY OF RS.2,97,250/- U/S 271( 1)(C). THE LD. CIT(A) SIMPLY BELIEVING THE SUBMISSIONS OF THE ASSESSEE HA S DELETED THE PENALTY WHICH IS NOT CORRECT. ACCORDINGLY, IT WAS PRAYED TH AT HIS ORDER BE SET ASIDE AND THAT OF THE AO BE RESTORED. 5. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSESS EE RELYING ON THE ORDER OF LD. CIT(A) SUBMITTED THAT THE ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE SUPREME COU RT IN THE CASE OF CIT VS. RELIANCE PETROPRODUCTS LTD. (2010) 322 ITR 158( SC). THE LD. CIT(A) HAS RIGHTLY DELETED THE PENALTY AFTER DISTINGUISHIN G THE CASE LAWS RELIED BY THE LD. DR. ACCORDINGLY HE PRAYED THAT THE ORDER OF LD. CIT(A) BE UPHELD. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RECORD, WE ARE OF THE VIEW THAT THERE IS FORCE IN THE SUBMISSI ON OF THE LD. COUNSEL. IN OUR CONSIDERED OPINION, THE ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HONBLE SUPREME COURT IN THE CAS E OF CIT VS. RELIANCE PETROPRODUCTS LTD. (2010) 322 ITR 158 (SC) WHEREIN IT HAS BEEN OBSERVED THAT PENALTY IS ATTRACTED IF DETAILS SUPPL IED IN THE RETURN ARE NOT ACCURATE, NOT EXACT OR NOT CORRECT, NOT ACCORDING T O THE TRUTH OR ARE ERRONEOUS. WHEN THERE IS NO FINDING THAT ANY DETAIL SUPPLIED BY THE ASSESSEE IN ITS RETURN OF INCOME IS INCORRECT OR ER RONEOUS OR FALSE, THERE IS ITA NO.2912/AHD/2009 ASST. YEAR 2004-05 7 NO QUESTION OF LEVYING PENALTY U/S 271(1)(C) OF THE ACT. MERE MAKING A CLAIM WHICH IS NOT SUSTAINABLE IN LAW WILL NOT AMOU NT TO FURNISHING OF INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. IN THE PRESENT CASE THE CLAIM OF THE ASSESSEE HAS BEEN DISALLOWED BUT THERE IS NO FINDING THAT THE FACTS GIVEN BY THE ASSESSEE IN ITS RETURN OF INCOME ARE INCORRECT, INACCURATE, FALSE OR ERRONEOUS. WE ARE OF THE OPINI ON THAT THERE IS NO MISTAKE IN THE ORDER OF LD. CIT(A). WE FEEL NO NEED TO INTERFERE WITH HIS ORDER. THE SAME IS UPHELD. THE GROUND RAISED BY THE REVENUE IS DISMISSED. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 21/12/11. SD/- SD/- (A. K. GARODIA) (D.K. TYAGI) ACCOUNTANT MEMBER JUDICI AL MEMBER AHMEDABAD, MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD ITA NO.2912/AHD/2009 ASST. YEAR 2004-05 8 1.DATE OF DICTATION 12/12/2011. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING MEMBER.OTHER MEMBER 20/12/2011 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..